New trend: Vietnamese capital flowing into foreign real estate markets

Outflow of capital

In mid-April, 2017, an Australian real estate firm organised a Ho Chi Minh City-based meeting to showcase its deep gratitude to customers who received its consultancy and bought houses in Australia in 2016.

At this event, Tran Thai Nhu, director of a pharmaceutical company in District 5, said that at the beginning of 2016, with more than VND10 billion ($440,000) in hand, she intended to invest in the real estate market by looking for a villa at a riverside project in District 7. However, the prices of these villas are more than VND20 billion ($880,000) apiece.

“I do not want to borrow from banks at high interest rates, while the domestic real estate market is unstable. And then, a friend convinced me to buy a villa in Australia instead of investing money into the domestic real estate market,” she said

“After receiving the consultancy of Australia-based real estate firms and Vietnam-based agencies and advices from acquaintances, I see that the real estate market there is always stable, the prices increase regularly, the procedures are easy, and local banks are willing to support foreigners in buying houses, allowing them to borrow up to 60 per cent of the value of the house through guarantees of the consulting firm and lawyers.

In addition, my son is going to study in Australia, therefore it’s better to buy a home for him to live. When my son finishes studying and in case he does not want to remain in Australia after graduation, I can resell the property with a very high return as selling and paying for real estate in Australia is easy,” said Nhu.

According to the assessment of a UK-based real estate consultancy firm which has an office in Ho Chi Minh City, the US real estate market has recovered in the past two years after falling into a record-low during the 2008-2011 economic crisis.

Therefore, some of the affluent Vietnamese people have started purchasing houses in the US. Especially, the demand for houses abroad has increased in recent years, with a focus on the US and Australia as prices are fitting the purses of wealthy Vietnamese people

In addition, these markets are financially stable and offer good welfare and favourable land ownership policies.

According to Nguyen Le Van, Asia-Pacific business development manager of iWealth Pro Property Consultants Company, a large number of Vietnamese buyers have been flocking to foreign markets for real estate investment. The demand for buying houses abroad is quite diversified, ranging from having a home for children studying abroad, and investing to settlement.

Van added that Australia is famous for its advanced social security policies, political stability, and financial stability.

Given these favourable conditions, Australia is an ideal country for homebuyers looking to settle here, the majority of which are Chinese and Vietnamese people.

With regards to investment purposes, Van said that the Australian real estate market lures in investment from all over the world. The regular increase of housing prices brings about large investment opportunities.

Along with supportive financial policies from banks, safe and effective investment options in Australia are not only for the affluent, but also the general upper class.

“In Vietnam, there are about three or four companies acting as a direct bridge between Vietnamese buyers and real estate project owners in Australia. There are also many other companies specialising in the markets of Canada, the US, and Singapore working to connect buyers and owners and offer consultancy for Vietnamese people,” Van said.

In the UK in 2013, in order to attract Vietnamese investors to real estate, for the first time a high-end apartment project in London was officially offered in Hanoi for £7 million per unit ($9 billion).

Tran Van Tuan, a counsellor at a consultancy company that works with people who want to emigrate to the UK, said foreigners purchasing houses for two million pounds or more and not selling them within four years will be considered for British citizenship.

“This is a big incentive that has not passed unnoticed by investors. My company has supplied consultancy services for more than 200 Vietnamese buyers looking to own houses in Britain in the past two years,” said Tuan.

According to the analysis of a real estate expert, the number of affluent Vietnamese is increasing dramatically. A significant number of them is looking for investment opportunities or even a chance to settle abroad.

Vietnamese people pour capital into the real estate markets of countries like Australia and Canada, where immigration procedures are not too strict and foreigners are actively invited to settle.

In Singapore, a report from Savills states that foreigners make up 30 per cent of the real estate market, including a significant number of Vietnamese people.

Prudency and caution advised

According to the Ho Chi Minh City Real Estate Association (HOREA), Vietnamese people’s demand for purchasing homes abroad has recently been on a strong increase. While the domestic real estate market was frozen during the 2011-2013 period, many people looked for safe investment options or poured capital into buying homes abroad. However, it is an informal investment method.

“Most of the Vietnamese people’s purchase of houses abroad are said to be illegally because the country is tightening the outflow of foreign currency. A lot of Vietnamese people have invested into foreign markets, showing signs that there are loopholes in foreign exchange regulations,” said a HOREA representative.

“We have to learn from the recent experience of the Chinese real estate market, when the people withdrew a huge amount of foreign currency with an aim to buy houses around the world,” warned the representative.

HOREA chairman Le Hoang Chau confirmed that only two Ho Chi Minh City-based companies are licensed to conduct real estate transactions abroad. These are Thu Duc Housing Development Corporation with an office in the US and Hoang Anh Gia Lai.

In case other companies in Ho Chi Minh City are operating in this field, they are doing so illegally, without a licence.

Ngo Quang Phuc, deputy general director of Him Lam Land, said that people purchasing houses abroad should be cautious. While the Vietnamese real estate market has so many lucrative opportunities, investors need to carefully consider the legal risks accompanying illegal money transfer, the risks arising from changing local policies when buying houses abroad, or dishonesty on the side of the consultancy company.

“With interest rates abroad being nearly zero per cent, the investment will yield little profit. If any at all, profit would only come from a wave of temporary buying and reselling. Therefore, except for some unforeseen reasons, such as the need for settlement, I still recommend that people choose real estate projects in Vietnam for investment purposes,” Phuc said.